By Deputy Commissioner Sunita Lough
Few things can generate as much taxpayer concern, confusion and controversy as an IRS audit.
Tax audits are a critical compliance tool to help ensure fairness in the tax system, and the IRS works hard to ensure the agency’s audit selection process is fair and impartial. Decisions to conduct audits are based on the financial information that’s on – or not on – the tax return. There’s an extensive set of checks and balances to ensure fairness with individual audits, and there are important protections and appeals for taxpayers during the administrative process as well.
But before an audit of a taxpayer takes place, the IRS career leadership team must make higher-level decisions on where to focus our limited audit resources across the agency. Given the breadth of our economy and the types of income people have, the IRS takes steps to ensure audits are spread across income categories – to ensure fairness and support voluntary compliance with the nation’s tax laws.
Like many things involving taxes, there are complexities behind audit rates. On the surface, these can be easy to misinterpret. A Closer Look at audit rates provides insight into which income groups are more likely to be audited.